In a project, a contractor needs an earth-excavating equipment, which he has the option of buying either from manufacturer M/s XYZ Equipment or from M/s EFG Equipment. M/s XYZ makes it under brand name A and M/s EFG under brand name B. For your convenience, assume that technically, there is no difference between them, and the decision has to be based purely on financial considerations. Some of the information that may be required in order to be able to make the decision is summarized in Table Q13.1.

Analyse and recommend which equipment you are going to buy. You can assume a minimum rate of return of 15 per cent per annum. Repeat the calculation for other rates of return also and see if a change in rate of return can change your decision.